The Chita City Court has delivered a sentence in the criminal case related to embezzlement of 15 million rubles from the municipal budget. In Internet advertisements of municipal auctions, the officials were replacing some Russian letters with Latin ones, thus, making impossible for search engines to locate information about the auctions. The functionaries used this trick to limit access to real estate auctions for outsiders – so that only a limited number of same real estate companies could participate in those.

On October 10, 2016 Vyacheslav Shulyakovsky, the former Deputy Mayor and the Chairman of the Committee for Urban Planning and Infrastructure Development, and Tatiana Okhrimenko, the ex-Head of the Financial and Economic Department of that Committee, have been found guilty under part 3 of Article 285 of the Criminal Code of the Russian Federation (Abuse of Official Powers). In addition, Shulyakovsky was found guilty under part 6 of Article 290 of the Criminal Code of the Russian Federation (Bribe-Taking on an especially large scale). The criminal case against the municipal officials was initiated in 2012, after a prosecutor’s audit of compliance with the budget legislation, that had identified an embezzlement of funds from the Chita municipal budget during acquisitions of housing for orphaned children.

The Vice-Mayor Shulyakovsky was arrested in February 2014 and immediately put in detention. He was arrested in the framework of a criminal case against functionaries of the Chita Municipal Administration suspected of abuse of official powers. According to the investigation, municipal officials had been purposively limiting access of potential bidders to auctions of housing for orphaned children. As a result, the same real estate companies were winning these auctions.

Shulyakovsky was the Head of the Auction Commission, while Okhrimenko was producing its documentation. In online advertisements of the auctions, the officials used to replace some Russian letters with Latin ones – thus, making impossible for search engines to locate information about the auctions. Shulyakovsky received bribes from agents and heads of Domaks and Creditline real estate companies for ensuring winnings of these brokerages at the auctions of housing for orphaned children. Then municipal contracts had been signed with these companies, and the Municipal Administration was purchasing the housing at artificially high prices. For example, in May 2012, the city acquired nine apartments in the Chernovsky and Ingodinsky districts of Chita for 12 million rubles – while the market value of the housing was some 7.5 million. In November 2012, the Municipal Administration paid 16 million 100 thousand rubles for 11 apartments in the Chernovsky district whose market value was some 7.7 million rubles. According to the investigation, the total of 20 such municipal contract had been signed. In the period of 2009–2012, 75.2 million rubles had been paid from the municipal budget for 60 apartments worth some 60 million rubles. The realtors used to pay kickbacks of 25–30 thousand rubles per apartment to Shulyakovsky. The total amount of bribes received by him has been estimated at 2 million 285 thousand rubles.

Photo: Vyacheslav Shulyakovsky was arrested in February 2014

Heads of Domaks Limited Liability Company and Creditline Limited Liability Company had been charged under part 5 of Article 291 of the Criminal Code of the Russian Federation (Bribe-Giving to a functionary by a group of persons by previous concert, or by an organized group, on an especially large scale) and were tried together with the municipal officials.

The scheme used to transform an open auction into a closed sales event for the chosen ones was simple but elegant. Those who were supposed to win the auction (i.e. to be its sole participants), had to know a simple code – what Cyrillic letters had been replaced with Latin ones. Such replacements made auction advertisements visible only for the pre-selected bidders. The criminal scheme was uncovered by
Chita.ru informational portal that has published an article about it. Law enforcement authorities have reacted to this article – but the officials in the Chita Municipal Administration pretended to be unaware of this play with Latin symbols. Allegedly they have heard about the trick only after an audit of one of the auctions by the Department of the Federal Antimonopoly Service of the Russian Federation in the Zabaykalsky Region. They attempted to explain the incident by a technical error – materials from the governmental acquisitions web sites posted by various clients had been allegedly copied and pasted during the preparation of the auction paperwork. And perhaps, they had inadvertently incorporated the Latin symbols posted by someone else into their documents – because it is impossible to distinct the Latin “o” and Russian “o” visually. But such an explanation seemed dilettantish for people familiar with the submission procedures for auction applications – the information about an auction is being entered from scratch, manually, and into certain fields. Therefore, the Latin symbols were used on purpose. Following the audit by the Department of the Federal Antimonopoly Service in the Zabaykalsky Krai, the use of Latin symbols has been recognized illegal, and the financial inspection fined Andrei Cherepanov, the Senior Specialist of the Department of Capital Construction of the Committee for Infrastructure Development of Chita, 15 thousand rubles for this violation. In October 2015, the Prosecutor’s Office has submitted to the investigative authorities materials of a general audit in order to initiate a criminal prosecution of owners of Domaks and Creditline real estate companies, the Krutikov spouses and Maltsev, suspected at that time of embezzlement of 7 million rubles during the sales of housing for orphaned children in cahoots with unidentified functionaries of the Municipal Administration. The investigation has found that one of these unidentified functionaries was Shulyakovsky.

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Vyacheslav Shulyakovsky used to work at different times as a mason, engineer, locksmith, driver, and director of a construction company. He became employed with the Chita Municipal Administration in 2003 as a Specialist in the Department of Construction, Transport, and Communication. In 2007, was appointed the Head of the Department. In 2009 ran for the Chita Mayor. On October 31, 2013 was appointed the Deputy Mayor and the Chairman of the Committee for Infrastructure Development.

Vyacheslav Shulyakovsky has been arrested in February 2014, he became the third high-ranked municipal official of Chita under criminal prosecution in that period. In December 2013, two former Deputies of the Chita Mayor had been arrested on suspicion of bribe-taking: Anatoly Kulikov, the Head of the Committee for Construction and Infrastructure Development, and Lyubov Kleinos, the Head of the Administration Apparatus. According to the investigation, they registered booths in a newly-built Panorama shopping and recreation center in the names of their relatives in exchange for issuing construction permits for it to the developer. Kulikov also requested the director of a commercial organization to give him 7.5% of the contract amount, which was 57.3 million rubles. The assistance of the official cost the businessman almost 4 million rubles.

Photo: Anatoly Kulikov, the Chairman of the Committee for Construction and Infrastructure Development

Later, in January 2014, another case has been added to the criminal file of Kulikov. This case was also initiated due to facts of bribe-taking: according to the investigation, in exchange for his services, the functionary had demanded construction materials for his garage from a businessman. It is necessary to note that Vyacheslav Shulyakovsky used to be the Deputy for Anatoly Kulikov, Chairman of the Committee for Construction and Infrastructure Development of Chita, for a long time; and after the retirement of Kulikov in October 2013, Shulyakovsky was appointed the Acting Deputy Mayor and Chairman of the Committee for Infrastructure Development. The former Mayor of Chita, who had left this post after being elected the Deputy of the Municipal Duma, has commented the arrests of his three former Deputies as follows: “There was no sufficient control over them from the city”.

The episode with housing for orphaned children has become the first criminal case in Russia where the use of Latin symbols in governmental acquisitions paperwork had been specifically noted. It turned out that regional Departments of the Federal Antimonopoly Service of the Russian Federation had already notified law enforcement authorities of the use of Latin symbols in governmental acquisitions more than once, but never received responses confirming initiation of criminal cases. The Chita investigators have managed to set a precedent.

A few weeks before the sentencing, the Municipal Administration has surprisingly withdrawn its lawsuit to recover damages in the amount of 15.2 million rubles from Vyacheslav Shulyakovsky, the former Deputy Mayor, and other suspects in the case related to acquisitions of housing for orphaned children at artificially high prices. The official reason for the withdrawal was that, unlike the investigation, prosecution, and court, the Municipal Administration believed that the acquisitions had been performed legitimately. According to the city, this was confirmed by audits carried out by regional Departments of the Federal Antimonopoly Service, Federal Service for Financial and Budget Supervision of the Russian Federation, the Chamber of Control and Accounts, Regional State Financial Inspection and their own audit. The Municipal Administration has admitted that, should the court grant the lawsuit withdrawal, neither the city of Chita nor the Prosecutor’s Office would be able to file this lawsuit again. In response, the Prosecutor’s Office has submitted an objection to the court requesting not to accept the lawsuit withdrawal from the Municipal Administration because it contradicts the legislation and violates rights of orphaned children – recipients of the housing. Ultimately the court has agreed with the Prosecutor of the Zabaykalsky Region, dismissed the motion brought by the city of Chita, and ordered to recover damages sustained by the Municipal Budget of the City of Chita in the amount of 15.2 million rubles from the convicted criminals.

Photo: Vyacheslav Shulyakovsky allegedly was not aware of replaced symbols in the auction paperwork

The court found Shulyakovsky guilty on all counts and sentenced him to 12 years in a maximal security penal colony. His accomplice Tatiana Okhrimenko was sentenced to 6 years in a general regime penal colony. Both of them have been deprived of the right to hold positions in governmental and local authorities for 3 years. In addition, Shulyakovsky was fined 5 million 650 thousand rubles.

Ivan Maltsev, Aleksander Krutikov and Lyudmila Krutikova, heads of Domaks and Creditline real estate companies, have been sentenced together with the officials. Ivan Maltsev and Aleksander Krutikov were found guilty under part 5 of Article 33 and part 3 of Article 285 of the Criminal Code of the Russian Federation (complicity in abuse of official powers) and sentenced to 5 years conditionally each. They have also been deprived of the right to run real estate operations for 3 years. Suspects Maltsev and Krutikova have been released from criminal liability for bribe-giving due to their active repentance and assistance in the exposure and investigation of the crime. The attorney for Vyacheslav Shulyakovsky, the ex-Deputy Mayor of Chita, who was sentenced to 12 years behind bars, intends to appeal the conviction.